In re Tobacco Cases II

• Decision Date: 25 October 2001
• Docket Number: No. D035450.,D035450.
• Citation: 93 Cal.App.4th 183,113 Cal.Rptr.2d 120
• Parties: In re TOBACCO CASES II. [Four coordinated cases]<SMALL><SUP>*</SUP></SMALL>
• Court: California Court of Appeals Court of Appeals

113 Cal.Rptr.2d 120

93 Cal.App.4th 183

In re TOBACCO CASES II. [Four coordinated cases]^*

No. D035450.

Court of Appeal, Fourth District, Division 1.

October 25, 2001.

Rehearing Denied November 19, 2001.

Review Granted June 29, 2002.

Law Offices of Jack R. Ormes and Jack R. Ormes, Pasadena, for Plaintiff and Appellant Operating Engineers Local 12 Health and Welfare Trust Fund.

Cotchett, Pitre & Simon, Joseph W. Cotchett, Marie Seth Weiner and Gwendolyn R. Giblin, Burlingame, for Plaintiffs and Appellants U.A. Local No. 467 Health and Welfare Trust Fund, U.A. Local No. 393 Health and Welfare Trust Fund, and North Coast Trust Fund.

McCarthy, Johnson & Miller and Raphael Shannon, San Francisco, for Plaintiffs and Appellants U.A. Local No. 467 Health and Welfare Trust Fund, and U.A. Local No. 393 Health and Welfare Trust Fund.

Beeson, Tayer & Bodine and Geoffrey Piller, Sacramento, for Plaintiff and Appellant North Coast Trust Fund.

Van Bourg, Weinberg, Roger & Rosenfeld, Los Angeles, Christian L. Raisner, Theodore Franklin, Oakland; Milberg, Weiss, Bershad, Hynes & Lerach LLP, William S. Lerach, Michael Dowd and Frank J. Janecek, Jr., San Diego, for Plaintiff and Appellant Operating Engineers Health and Welfare Trust Fund for Northern California.

Simpson, Thacher & Bartlett, Steven H. Bergman, Los Angeles, Demetra V. Frawley, Mary Elizabeth McGarry; Steefel, Levitt & Weiss, Barry W. Lee and Peter N. Larson, San Francisco, for Defendant and Appellant B.A.T. Industries.

Munger, Tolles & Olson LLP, Gregory P. Stone, Daniel P. Collins, Los Angeles, and Martin D. Bern, San Francisco, for Defendant and Respondent Philip Morris Incorporated.

Howard, Rice, Nemerovski, Canady, Falk & Rabkin and H. Joseph Escher III, San Francisco, for Defendant and Respondent R.J. Reynolds Tobacco Company.

Pillsbury, Madison & Sutro LLP and Anthony R. Delling, Los Angeles, for Defendant and Respondent Brown & Williamson Tobacco Corp (individually and as successor by merger to The American Tobacco Company).

Loeb & Loeb LLP and Daniel G. Murphy, Los Angeles, for Defendant and Respondent The Council for Tobacco Research—U.S.A., Inc.

Shook, Hardy & Bacon LLP, San Francisco, and Larry R. O'Neal, Kansas City, Mo., for Defendant and Respondent Lorillard Tobacco Company.

Crosby, Heafey, Roach & May, Los Angeles, and Mary C. Oppedahl, Oakland, for Defendant and Respondent The Tobacco Institute, Inc.

Coughlan, Semmer & Lipman, LLP, San Diego, and R.J. Coughlan, Jr. for Defendant

and Respondent United States Tobacco Company.

Chadbourne & Parke, LLP and Susan St. Denis, Los Angeles, for Defendant and Respondent British American Tobacco (Investments) Limited.

Krieg, Keller, Sloan, Reilley & Roman and Stanley G. Roman for Defendant and Respondent Hill & Knowlton, Inc.

Segal & Kirby and James R. Kirby II, Sacramento, for Defendant and Respondent Smokeless Tobacco Council, Inc.

The Lendrum Law Firm, Jeffrey P. Lendrum, San Diego; Kasowitz, Benson, Torres & Friedman, LLP and Julie Fischer for Defendant and Respondent Liggett Group, Inc.

KREMER, P.J.

Plaintiffs Operating Engineers Local 12 Health and Welfare Trust Fund (Local 12) et al.¹ (collectively referred to as Plaintiffs) appeal a judgment dismissing their coordinated and consolidated lawsuit for negligent misrepresentation and intentional fraud against defendants Philip Morris Incorporated et al.² (collectively referred to as Defendants). Plaintiffs contend the court erred in sustaining without leave to amend Defendants' demurrer to Plaintiffs' claims for negligent misrepresentation. Plaintiffs also contend the court erred in assertedly declining to permit them to pursue intentional fraud claims based upon Defendants' alleged nondisclosure/concealment. We affirm the judgment of dismissal.

Defendant BAT Industries appeals an order denying its motion to quash service of summons, asserting the court should have concluded BAT Industries' contacts with California were insufficient to support personal jurisdiction. We dismiss BAT Industries' appeal as moot.

I PLAINTIFFS' APPEAL

A Introduction

For purposes of determining the propriety of the court's rulings on Defendants' demurrers to Plaintiffs' claims for negligent misrepresentation and intentional fraud, we state the material facts properly pleaded by Plaintiffs. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38, 77 Cal.Rptr.2d 709, 960 P.2d 513; Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)

Plaintiffs are California health and welfare trust funds who under collective bargaining agreements provided health, medical and related benefits to union members and their dependents. Defendant United States Tobacco Company dominated the market for smokeless tobacco including snuff and chewing tobacco. The remaining Manufacturing Defendants controlled the United States cigarette market. The Research/Publicizing Defendants conducted research and marketing on behalf of the Manufacturing Defendants.

Defendants were cognizant of the adverse health effects and addictive nature of the tobacco products they were manufacturing, selling, advertising, researching, testing and distributing. Nevertheless, Defendants perpetrated a conspiracy of deceit to hide the truth about those matters and intentionally manipulated the nicotine content of their products to make them more addictive. More particularly, Defendants made misrepresentations to Plaintiffs about the health consequences of smoking and the addictive nature of nicotine. As a result of Defendants' misrepresentations, Plaintiffs did not take steps to dissuade their participants/beneficiaries from smoking. Defendants' misrepresentations also caused an increase in smoking and smoking-related illnesses in some of Plaintiffs' participants/beneficiaries. Plaintiffs were thus required to pay for the medical treatment provided to their participants/beneficiaries who were adversely affected by using Defendants' tobacco products. Plaintiffs' increased payments for medical expenditures caused by Defendants depleted the fixed assets of Plaintiffs' trust funds and diminished the funds available to pay for other benefits for smokers and nonsmokers during the remainder of the terms of the collective bargaining agreements.

In essence, this lawsuit alleged that Defendants' misrepresentations increased Plaintiffs' costs and decreased the corpus of Plaintiffs' trusts. Plaintiffs thus sought to recover from Defendants the economic injuries suffered by Plaintiffs consisting of the depletion of their trust funds' assets. However, the superior court sustained without leave to amend Defendants' demurrer to various plaintiffs' claims for negligent misrepresentation on the ground the derivative economic damages sought were too remote to be actionable. Further, in overruling Defendants' demurrer to various plaintiffs' claims for intentional fraud, the superior court commented that Civil Code³ former section 1714.45 barred the portions of such claims based upon Defendants' alleged nondisclosure/concealment. Although the superior court did not definitively preclude Plaintiffs from proceeding on their intentional fraud claims, Plaintiffs ultimately chose not to do so.

Moreover, after receiving unfavorable rulings involving matters not at issue on this appeal, Plaintiffs asked the superior court to dismiss this lawsuit. Plaintiffs now appeal the ensuing judgment of dismissal.

B

Discussion of Plaintiffs' Appeal Procedural Background of Plaintiffs' Coordinated/Consolidated Lawsuit

(a) Proceedings Before Consolidation

In September 1997, plaintiff Local 12 filed a class action lawsuit (Class Action) in Los Angeles County alleging numerous claims against various Defendants.

In March 1998, represented by the law firm of Cotchett, Pitre & Simon (Cotchett), plaintiff Local 467 filed a lawsuit against Defendants in San Mateo County alleging numerous claims including intentional fraud/deceit, negligent misrepresentation and Business and Professions Code violations.

In July 1998, in the Class Action, the Los Angeles court sustained various Defendants' demurrers to all claims in Local 12's first amended complaint but granted leave to amend with respect to its claims for intentional fraud, civil conspiracy and Business and Professions Code violations. In doing so, the court stated that section 1714.45, as amended effective January 1, 1998, did not bar Local 12's claims.

(b) Creation of Coordination Proceedings

In August 1998, Local 12's Class Action, Local 467's lawsuit and eight similar complaints filed by Cotchett-represented plaintiffs were ordered coordinated.

In December 1998, the coordination trial judge added to the coordination proceedings similar complaints filed between April and September 1998 by 15 more Cotchett-represented plaintiffs including Local 393 and North Coast.

(c) The Controverted Postcoordination Demurrers

In December 1998, various Defendants jointly demurred to the intentional fraud and conspiracy claims of the second amended complaint in Local 12's Class Action. However, in light of the Los Angeles court's earlier ruling that amended section 1714.45 did not bar Local 12's claims, the demurring Defendants in December 1998 did not raise the issue whether such statute applied to bar the intentional fraud claim in Local 12's second amended complaint. In December 1998, various Defendants also filed a consolidated joint demurrer to the complaints of the 24 Cotchett-represented plaintiffs.

In March/April 1999, in Local 12's Class Action, the court overruled Defendants' demurrer to the second amended complaint's claims for intentional fraud and civil conspiracy. At the same time, the court sustained without leave to amend Defendants' demurrer to the Cotchett-represented plaintiffs' claims for negligent misrepresentation on the ground that the alleged derivative economic damages were too remote to be actionable. However, the court overruled Defendants' demurre...